Dollar Drops 2% as Trump Eyes Early Fed Chair Pick

On Thursday, the dollar experienced a significant decline following a report that President Trump might announce his pick for the next Federal Reserve chair much earlier than anticipated. This news, which was first reported by a major financial publication, sent shockwaves through the markets as traders in Asia reacted swiftly, causing the US currency to drop against all its major peers.

Trump's dissatisfaction with the current Fed Chair Jerome Powell's handling of interest rates has been well-documented. The President believes that Powell has been too slow to cut rates, which he argues is keeping government borrowing costs high and hindering economic growth. Trump has openly criticized Powell's recent decision to keep interest rates on hold, and earlier this month, he hinted that new names for the Fed chair position would be coming "very soon."

According to the report, Trump is considering making an announcement as early as September or October, well before Powell's term ends in May 2026. The names being floated inside the White House include Kevin Warsh, a former Fed governor, and Kevin Hassett, the director of the National Economic Council. Both men have had previous ties to Trump’s circle, and the idea of naming a successor so early is already shaking investor confidence. Trump told reporters Wednesday he’s currently considering “three or four” potential replacements.

Rodrigo Catril, a strategist, said Trump’s possible early announcement could “amp up the pressure” on Powell long before his term ends. “We could have a shadow Fed chair before May next year,” Catril said, adding that this kind of political pressure could push the dollar lower in coming weeks. When asked about Trump’s intentions, the White House responded by saying the Fed should focus on growth-oriented monetary policy. Powell, for his part, insisted politics wouldn’t influence the Fed’s choices.

“If we make a mistake here, people will pay…the cost for a long time,” Powell told lawmakers during a Senate hearing. He added that rate cuts are still possible later this year, but said the Fed would take a “careful approach.” On the timeline, Larry Bessent, current Treasury Secretary, previously said interviews for the next chair wouldn’t begin until September. But that schedule might not hold. The Fed’s independence has been guarded since the 1970s, when President Nixon pressured the central bank for lower rates ahead of his reelection. That led to disastrous inflation that took years to fix.

Trump has had Warsh on his radar for a while. He spoke with him earlier this year about possibly replacing Powell before his term ends. Warsh was also interviewed by Trump last fall for the Treasury job. At a closed-door event in Boston this month, Warsh told a group of finance professionals, “I wouldn’t be shocked if the president made a nomination sooner than would be customary, just to…try to make a lame duck lamer or something like that.”

Still, there are concerns. Some of Trump’s aides worry Warsh could be a maverick. He’s long been seen as a policy hawk, more focused on fighting inflation than boosting employment. When asked about that label in Boston, Warsh said, “My fatal flaw is I say what I believe. If the president wants someone who is weak, I don’t think I’m going to get the job.” He also took a shot at zero interest rates: “When things are free, when rates are zero, that leads to very bad economic outcomes.”

Warsh also praised Kazuo Ueda, head of the Bank of Japan, saying he’s “the most talented central banker on the planet right now.” Then there’s Hassett, who’s reportedly told people he’s not interested in taking the job. That makes room for Bessent. Despite saying he’s committed to his current position, people familiar with both him and Trump say Bessent hasn’t ruled it out. Speaking before Congress earlier this month, Bessent said, “I’m happy to do what President Trump wants me to do.” That loyalty matters—Trump barely knew Powell when he picked him in 2018 and now sees that decision as a mistake. He’s determined not to repeat it.

Trump has also been talking to aides about David Malpass, who ran the World Bank during his first term. Malpass has recently supported rate cuts and criticized the Fed’s internal models in a Journal op-ed. Those views line up with Trump’s. But in recent private dinners and lunches, Trump reportedly raised doubts over Malpass’s TV appeal, suggesting his appearance might not suit the role.